Remember these words: I should have listened.

“I should have listened,” say the skeptics, cynics and the disbelievers. But they are speaking of you and your words once you realize they were right. They may honestly believe that your bitcoin fascination will end sadly, wherein they can dutifully remind you that they told you so.

“I should have listened,” might be the words created during times of frustration in the mind of this reader from time to time. These thoughts and feelings may come to the relatively inexperienced Bitcoiner who may have, unfortunately, purchased a few bitcoin during the peaks to sadly watch the price deflate. For those who only know bitcoin as a possible currency replacement, or an investment in some way that only shows on the surface of bitcoin, it may seem like dark days. They might have read about the great bitcoin crashes in the past, but perhaps the cycle and patterns won’t repeat this time.

Most Bitcoiners have been told, by the ‘experts’ in popular opinion, that bitcoin is a scam, a ponzi scheme, or a joke. It must be true – the public reason, because they read it on the Internet. The public also might get their inside information from their government, their news channel or their neighbor. Everyone must think they are the experts blockchain technology, yet 99% of the population wouldn’t know a blockchain from a dog chain.

The eye sees only what the mind is prepared to comprehend. A quick glance at history will reveal closed societies that refuse to think outside their own paradigm. They shun new ideas or thought and progress.

“It’s a ‘pump and dump.’ You’ve been duped,” they tell us. Many Bitcoiners have tried to explain how it will change the world – but are met with skeptics who point to the steady decline in price as their proof. Most have never heard of blockchain technology, or understand how it is already changing the world. They have yet to learn of the changes they’ll find in passports, privacy and property.

The price of bitcoin has gone down fairly steadily throughout the year and not without reason. There have been major shocks to the bitcoin system this year, such as the spectacular implosion of Mt. Gox. Ominous warnings from repressive governments reminding their citizens that bitcoin isn’t a legal tender, as if they needed reminding that you can’t spend a foreign currency to pay your bills. Yet despite the bad news that seemed to pile on bitcoin to begin the year, bitcoin still hangs around. It still makes the news. The on-air skeptics which laughed only a year ago have straight faced conversations now. Old school economists still can’t believe the world would embrace a paradigm change that would then make their work seem less relevant.

Paul Krugman

Paul Krugman

Famous old-school economists like Paul Krugman may take delight with each price drop. Perhaps he’s writing and rehearsing his speech already: “Bitcoin – I told you so”

“I should have listened,” could be the words that haunt some early bitcoin adapters. They were brave enough to think differently than most of the world and many were even told – that they thought foolishly. Early Bitcoiners have largely steeled themselves to these opinions and adapted to become stronger because of the constant barrage of criticism. New York Magazine’s Kevin Roose, wrote an article in March of this year, describing the bitcoin community as a cult. But sometimes even the critics come around. Kevin recently left New York Magazine to work for ThisIsFusion, his new employer seems intent on promoting bitcointhrough Twitter. Convert, or two-faced? Knowing that your fellow Bitcoiners have also faced the strange looks and sideways tilting heads showed that shared experiences strengthens the bonds in the community. Having somebody call you ‘crazy’ might be a badge of honor in the Bitcoin crowd. That’s a sign you’re now on the ‘inside’. However, if you are looking for a cult to join – you’ll need to lookelsewhere.

Most in the bitcoin space already know that bitcoin investment is not for the faint of heart. The common mantra from even the Bitcoin Foundation Chief Scientist is: “Do not invest more than you can afford to lose.” Of course, some choose to ignore these words. Others have used the opportunity to double-down on their investment, taking advantage of the cheaper prices. But yet the dark clouds continue to hang over the bitcoin world. The community is likely ready for the “bitcoin weatherman” to give a good news forecast for bitcoin which includes warmer temperatures and sunshine. They want to have the reassurance that they did not give their hearts and minds to a cause and movement that only fizzles while the world reminds them that they should have listened.

The thought that bitcoin could go to zero would be a bitter pill to swallow, probably more than almost any other investment because of the emotional investment many have with the technology. To be fair, it would likely be hard for most to not be emotional about this bitcoin. It is different because it carries the baggage of forcing Bitcoiners into defending it and by extension oneself for believing in the idea because it comes to represent the essence of the individual. One’s judgment and vision may be called into question for following the road less traveled. Defending bitcoin is defending yourself because it is so different. To remain centered, it’s perhaps best to expect the price to reach zero. How does one know if they’ve invested too much money into bitcoin as an investment? If they will lose sleep if the price of bitcoin goes to zero. Most current day bitcoin investors have yet to have the honey badger of money come to their rescue as he has so often in the past.

It appears that fans in the bitcoin space are increasingly diving into two camps. In one camp we have those who are mostly interested in the speculation and investment. They don’t really care for the politics or movement that has begun around the technology. The Wall Street investors and most venture capital money seem to fall into this category. The other camp is the “hard-core” Bitcoiners who think of it not as a currency or payment system, but as freedom.

It’s a movement.

It might be argued that this group wouldn’t mind so much if the technology promised by the blockchain invention will live on in other currencies or methods that have just begun. Of course, some may be evenly split – but if bitcoin fails the movement will live on through the explosion of innovation that follows.

Bitcoiners are at a unique advantage point to watch the development, understand the advances that are happening in the science and, most importantly, to be there first. Bitcoiners are the ones feeling the pulse of the future in blockchain technology. A skeptic may believe these words that encourage readers to adjust expectations that the bottom could fall out and they are only preparing to concede defeat. However this is not the case. There is no “we’ll get them next year” mentality unlike the fans of every sports team – minus one. Many Bitcoiners have skeptical friends and family who refuse to try to understand what the fuss is all about. They might be all too happy to say those four hated words nobody likes to hear:

I. Told. You. So.

Now for the good news:

Stubborn rays of hope refuse to be extinguished.

Again, and again, and again the topic of bitcoin relentlessly resurfaces again proving: it’s not dead yet. This fact must be annoying to the critics who haven’t been able to see past their own present paradigms. People EXPECT bitcoin to fail. The longer it hangs around, the more it stays in the news, the more everyone talks about it: may slowly and silently be chipping away at their resolve. Justifying their opinion becomes more difficult and their ego will instinctively remind them to be consistent with themselves to save face. But reality and ego might be destined for a collision course.

Why does it seem that many Bitcoiners are actually… happy? There are conventions and meetups where people don’t seem to care about the price. Many in the bitcoin space readily admit that the price is perhaps the LEAST interesting part of the bitcoin story. Wall Street firms are preparing to create Equity Trading Funds (ETFs). Commodities Futures and Trade Commission (CFTC) have already held hearing and the general feeling is that all systems are go. The CFTC is the agency that regulates gold, silver, and other commodities and they consider bitcoin in the same category. Their charge is to guard against price fixing and market manipulations. If they are successful the wild price swings could finally find calmer and more predictable waters. The fact that bitcoin currently does not have a stable and predictable price is the biggest knock against it. If we want to use bitcoin as a currency, we need to be able to cross off the “store of value” complaint that critics maintain. It remains to be seen how effective the attempts by the CFTC will be.

How much do these Wall Street companies say about the price of bitcoin these days? The silence is deafening. They are keeping their cards close to their vests. This could be a good sign for bitcoin holders. Hedge funds, mutual funds, and other big firms have strict restrictions in the kinds of investments they are allowed to allocate funds. When regulations are finalized all the pieces could fall into place that will finally allow the financial vehicles from which they can allocate some diversification money. The regulated bylaws do not allow them to invest in bitcoin directly, just as they cannot invest in gold or silver directly. They do so by using the gold and silver ETFs that track the price and (supposedly) are backed by the asset. If just a one percent investment allocation is diverted toward digital currencies by these huge firms … the price will explode. If just one percent of the allocation of gold investment was hedged into bitcoin – the price will explode. Bitcoin meets the criteria of being the magic word investors love to hear: “non-correlated asset“. In these scenarios, the projected price possibilities are so incredible it may be seen as imprudent to speak of them out loud. Many of these fund managers are likely licking their chops wanting to get in early. If the price does explode, other mutual fund managers will be under pressure for their own funds to compete. This domino effect could result in its own positive feedback loop.

Circle Internet Financial just came online and out of beta and it is silky smooth.Bitcoin Investment Trust was created by SecondMarket and its first New York regulated exchange is reportedly just waiting for the New York regulators to issue final guidance. PayPal is entering the business. There have been some indications that Dell has more plans for bitcoin beyond just accepting it as a payment option. Many industry experts indicate the hottest job market in the field of technology now is going to bitcoin startups.

New York seems to be closer to having a workable bitcoin licensing plan. Several foreign governments appear to be finally ‘getting it’ and warming to the idea of bitcoin related jobs invigorating their economy. Wall Street firms need to purchase bitcoin funds at low market value – the lowest possible. I don’t want to start a conspiracy theory, but logically, would it not make sense to be pleased to see the price of bitcoin going steadily down so they could strategically move into position and buy it up before making any big announcements? Wouldn’t you if in the same position? The entire bitcoin market cap is child’s play for big Wall Street firms. The market is so thinly traded (by Wall Street Standards) that they could probably assign an intern to buy and sell at the right pivot points to send the price exactly where they want it. Or a wealthy hedge fund manager using his personal money over a few lunch hours. For now, small time players will be just have to hang on for the ride. Hope for the best, prepare for the worst.

In short, it seems that the market price and the news lurking around the corner and hidden in the details of news articles, do not align. This may only recognized by those “in the know” that track these events closely and can divine meaning. The current price does not match up with the rumblings of titanic shifts that are underfoot. I do not give financial advice – but I do give caution…don’t get greedy and limit your excitement to what will allow you to sleep peacefully if it doesn’t go as you’ve planned. But… on the other side of all this talk about preparation – it’s fun to imagine preparing for takeoff. In this case, a safety harness and safety straps may be in order. Strap in for the wild rocket ride that might be possible in the months and years ahead. Remember to keep your hands and feet inside the rocket ride at all times. While you’re on it, try to come up with something good to say every time you hear those four words from your friends, family and foes.

Capital controls are a certainty. They have already started. Just look at Cyprus to see the authorities' game plan for when things start to unravel. Everything was locked down.

My approach is a blend of gold, silver & cash in my possession, the rest geographically dispersed offshore. Realistically only silver coins could potentially substitute as money for normal daily transactions like buying food. I also like Bitcoin as a way of getting out of the system and bypassing capital controls.

Here's a link to just one of the most recent examples from "Business Insider" magazine.. They are just now "getting it". I understand the difficulty grasping it, it takes most people about six months of careful study to put it all together, it's complex. But once they understand that currency is just the first app of potentially thousands of more that will build on the technology they experience what I have found...How in the world do you explain it in a way people will understand and not think you're nuts? After two years of laughing at it, they are finally having their "a-ha" moment. It floors them once they grasp what it means.

It makes me laugh out loud as I knew it eventually would. They are already saying "they should have listened".

Could you please look over the exchange between myself and LukeMoffett to see if I am missing his point? He is suggesting that an openness on the part of the Bitcoin.org to potentially increase divisibility (which would open the blockchain to becoming even more bulky and ponderous) is a detractor. I don't know how realistic it would be.. but I don't see it as a negative, because I would imagine it being a necessity only if Bitcoin became wildly popular and went through huge deflation (increases in buying power) first. As you say.. it can take a while for folks to process the many facets of Bitcoin... divisibility being but one. Thanks, Jim

As someone who was skeptical back when bitcoin was in its speculative bubble, I had lunch with Andresen (I know Jim, you probably can't believe it) a week ago and he completely agreed it was in a bubble. He also agreed bitcoin trades not just as a currency but heavily as a commodity. It is also TAXED like a commodity. The government is not opposed to bitcoin as some might think, but make no mistake it is taxed like any other commodity. We talked of other things, but I will stop there.

Quite a mover and shaker Marc is. Here is what he said in Oct. on Bloomberg;

"Bitcoin is truly radical, Cryptocurrency, more broadly, is a truly radical, truly revolutionary, fundamental breakthrough in computer science, completely different way to do transaction processing, potentially a replacement for a very large amount of the status quo, but has the big chicken-and-egg challenge.”

I don't really like using the term, "bubble" for the early peak in Bitcoin price... maybe over-exuberance would be a better description if you ask me. The market can be excused a bit for learning about this very new form of money. Again.. after all that it has been through, a single Bitcoin still will cost you $363 to acquire today. I am tending to believe that now that Bitcoin has been stable in price for a while... that the real "bubble" will be ahead for Bitcoin, along with Gold and Silver.

Let me challenge you Gillbilly, and anyone else reading this, to do two things.

One, ponder the chart of chart of China's appetite for Gold since 2009, with an emphasis on the present trend.

Currently the Bitcoin protocol (big B) indicates that the unit of currency aka "bitcoin" (small b), is a block of one-hundred-million ledger addresses on the public ledger, AKA 'blockchain'. The given name of bitcoin is simply another way to refer to 100,000,000 bits - as dollar is just another name for 100 pennies.

Gold is physically devisable to the level of an atom, but for practical or monitory purposes you really can't do much with less than a gram. I think most visitors on this website already realize that if it was not suppressed, gold might reasonably be measured in multiple tens of thousands of dollars per ounce. Worldwide money printing would equate catch up with ~20 trillion in "money" in the world system (comprised of liquid debt as well). That shock to all world-wide currency and banking markets needing to adjust and equalize would leave dead bodies in its wake and not realistic outside of a world war.

What would be the reasonable smallest purchase you could make with a gram of gold? Say gold is $50,000 per ounce. One gram is .03 ounces. This is $1607 as the smallest realistic measurement for useful trade without converting to paper and trust - we saw how well that worked out last time. How are you going to pay for groceries with that? - Silver wouldn't fair much better at around $100 per gram.

If you want to conduct business further than arm's length, you're going to both have to trust somebody - to keep the books and record how much everybody owns so who is that going to be? How about when you have different laws, court systems, politics, or religious differences? Last time we were on the gold standard we didn't have modern day banking and the internet. It probably won't ever be the same again.(although 'preppers' are counting on that not to be true - and I keep enough silver on hand to hedge that prediction).

The reference for bitcoin in the community is now shifting the naming to "bits" for the units of reference. They've begun referencing units from a full bitcoin block to the sixth decimal - then left two digits to the right of the decimal to represent partial units of that sixth spot. This is how most currencies are currently expressed to including the dollar... $1.27 for example. So this is what people are used to now, so it won't be such a mind-bender when needed.

It was getting strange paying for things with .002924 bitcoin for a candybar, but it makes more since to it cost 2924 bits (around $1.00 today). This was done with the full expectation that a full bitcoin could realistically reach 1 million dollars in valuation. At this period one "bit" would be on par with one dollar.

Bitcoin is top end limited to 21 million because they must inflate to handle world wide transactions. As it is considered much more seriously now to replace the current SWIFT and ACH banking rails which require 'rent' and currency conversions for each country bank that it passes through, governments and companies are seeing they can bypass the whole thing by using the blockchain.

The problem is that if bitcoin is only worth $350 and you need to pay a supplier in China 20 million dollars, there aren't enough freely trading bitcoins to transfer dollars into bitcoins on one end and then sell them for Yuan on the other without sending huge shock waves throughout the bitcoin exchange markets. We hit a peak of $450 a couple of weeks ago because of one guy in South America that bought a few millions worth at one time.

If we think of bitcoin as simply a payment mechanism, the 'envelops' to transfer world currency would have to inflate enormously to take on that load. Bitcoin valued at $100,000 could do it. How much is traded daily in the Forex markets? If just one percent of that was rerouted through the bitcoin network for speed, cost efficiency etc - how expensive would a full bitcoin be?

There are people on Wall Street making these plans right now. So to the original point about divisiblity, the program core recognizes down to the eight decimal spot and that is where it will remain until things become so expensive that we need to look further down, but that might not be for 100 years as the 21 million top won't be seen for another 120 years. That leaves us with "only" 2.1 quadrillion addressable sub-units to deal with. That program can only be changed when a majority of the bitcoin processors who effectively control the network agree by consensus that it is in the best interest of the network that we begin to recognize units smaller than eight decimals.

Right now it's like the land grab days of the old west. Comparing it to gold, just because you can measure gold at an atomic scale and value 'grains' of gold, it does not lesson the value of gold. We've never had anything like bitcoin to compare against. The bitcoin network now is shaping up to be the 'spine' of other digital records and properties including smart contracts and smart property. They are converging into a technology called "side chains" that will rewrite how law, accounting, record keeping, auditing, and voting will change. All these new technologies want to be protected by the safety of a computer system that can handle 400 quadrillion calculations per second (and climbing) so all the technologies are coalescing around bitcoin as their 'rock'. Its role is becoming more clear now than ever.

Some people are talking about buying bitcoin now as a modern day "land grab" for property that will be coveted in the future as the de-facto single source of truth. And the first system in the world that allows anybody in the world to use it without needing to trust anybody else's word that vow to hold our gold, or dollars, or silver or anything else that would require trust. It might well turn out that the banking system themselves will be the biggest users of it and change credit card systems and interbank transfers to the more efficient system. But for that - they will have to buy it - hopefully from one of us that has made their fortune for holding it before they could finally see the writing on the wall.

I've researched this quite a bit and found nothing but positive remarks and attitude from all agencies I could find that would have a stake in the matter. None of them truly consider it a threat and the NSA has ways to find bad guys as evidence by arrasting 400 suspect running illegal "tor" based bitcoin for drugs business. As this takedown was coordinate with agencies around the world, it was well planned and studied for some time.

Havning a block chain that leads them to all people involved like breadcrumbs will be a hudge adanvce of dollars which are usually untraceable. And bitcoin is impossible to counterfeit.

As far as bubbles I are to be expected as we see a revolution apearing before our eyes. This is a paradigm changing only on-par with the invention of the internet, but this is going to be much faster as the intac is now done.

All well and good, but what if what Chris is describing, i.e. an energy constrained world, which means a complexity constrained world, comes into being? And it doesn't have to be Mad Max to cause a serious crimp in electronic bitcoins.

I've been in several global locales where smooth and continuous electricity is not a given. In a debt crisis, the Western World could start to look like those locales in a relatively short time.

As far as I can tell, no electricity, no servers means no bitcoins. Not true for gold and silver.

Plus bitcoins do not have 6,000 years of human history, experience and literature to lean on. But that's not your or anyone else's fault.

Secondly, is there a way to counterfeit bitcoins? I confess ignorance here about how bitcoins are "mined" and authenticated / validated. But if there is any way to counterfeit them, or even trick some buyer into thinking you are transacting with 'real' bitcoins, then as bitcoins become as valuable as you believe, the pressures to counterfeit will become enormous. Thus it is always so for things of value, whether paintings, gold, or Chinese copies of DVDs.

Things of value always attract thieves and governments. But I repeat myself (hattip to Mark Twain).

Jim, It was Gavin Andresen not Marc Andreesen. Sorry I should have clarified. Also, to clarify I was talking about the bubble that happened a year ago...when I was skeptical, and yes, I'm glad I didn't buy any when it was up at $1k. I'm less skeptical of it now that the dust has settled. I don't think investing in some bitcoins is a bad thing but people need to go in with their eyes open, and I certainly wouldn't bet the farm.

Currently there is concern over centralized mining efforts, which I think could eventually spur a "winnner takes all" environment. Reduced energy costs in certain geographical areas will give a leg up to miners in that area. HRunner's point on PM having thousands of years of history is not a small point. Financially, people flee to what they know and understand. There really shouldn't be an "aha" moment in bitcoin. Or it shouldn't take pages of explanation and months of education for it to happen. For it to really take off, it needs to be simplified in its understanding. I can totally understand how it may grow into something more commonplace if people embrace it. Gavin expressed he would much rather see it grow slowly without the bubbles than what happened last year.

Because bitcoin only works on the internet it does require electricity. It is the only single currency used on the internet that can be used worldwide (although made illegal in a few of the most corrupt countries)

Much of the networks is run from servers (aka 'miners') in places like Iceland where the cooling is cheap and so is the power, coming from natural thermal vents. If running a bitcoin network pays the bills, they will find a way to get electricity, from generators, solar or whatever means they can. We can't underestimate motivation of the people.

Most bitcoin transactions happen over cellphones. These can be, and often are, charged with simple and cheap cellphone charging solar panels. Smartphones can now be had for around $20 around the world. This puts and entire bank in somebody's pocket where more than half of the world have no access to banking. With a smartphone they can now buy and sell from all points around the world without needing a bank. They can start businesses get supplies and pay suppliers. The finally enter the world wide market place for the first time. This is a paradigm change.

This has already happened in Kenya when the villages starting using cell phone and trading a digital currency called mpesa. based on cellphone prepaid minutes. This digital currency now accounts for over 60% of that country's GDP and all started less than 10 years ago. Often they have no electricity in these villages but do have a solar panel and a phone, and with just this simple advance, many villages have pulled themselves out of poverty. You can enter villages and see solar panels for each hut doing nothing but charging cellphones.

Hopefully that answers your concerns about electricity. The computing power automatically adjusts every two weeks to be harder or easier depending on how many 'miners' are competing for the right to process the last 10 minute block of transactions. It is self-correcting and honestly far too powerful than the network needs (around 400,000 times the top 500 supercomputers in the world combined, and continuing to climb).

These processors' effort also protects the network from attack. It's clever and elegant 'game theory' in the product code that acts as Adam Smith's 'Invisible Hand".

It is no surprise that the "money of freedom" would give reason to scare governments that are in control in corruption (i.e. Russia). Because bitcoin CAN be the most transparent currency ever conceived - as every transaction ever made is traceable back to the beginning of time and each coin ever created for the network. Although you might not know who owns any particular piece you can see without a doubt that it does exist and cannot be counterfeit. (more on that later)

It does not require dba's as it runs fine today, but it is open source so anybody in the world can suggest changes and even write code to be peer reviewed by the entire community who have a test network and thousands of programmers review each line of new code extremely suspiciously. The people verifying the bitcoin core code are the elite of the elite of programmers in this world. But everything is completely out in the open for anybody to inspect provided one has the education to read computer code. There are no secrets.

It does not require faster CPUs. In fact the entire bitcoin network could run on just two laptops located anywhere in the world. (Although less secure from attack). And it does not need trusted connections at all. In fact that was one of the primary reasons it was invented. It solves the problem of logic in the world of computers known as the Byzantine Generals' Problem.

I've been in several global locales where smooth and continuous electricity is not a given. In a debt crisis, the Western World could start to look like those locales in a relatively short time. As far as I can tell, no electricity, no servers means no bitcoins. Not true for gold and silver.

Hopefully I've addressed that in speaking of the worst conditions for electricity already proven to be no problem. But what happens if the internet goes down?

With new inventions relating to digital currencies you may not even need ISPs as each pc, smartphone, laptop etc can be immerged into a 'mesh network' that is a true net bypassing all infrastructure. Even the issuance of domain names once reserved by a small US based committee can be replaced by a decentralized program running automatically around the world creating an entirely alternative web. In short, if SHTF - there is already a backup plan in place that is not controlled by any government. It can be run from solar panels just as easily. This alternative web may come into existence ad-hoc by people too poor to afford internet access. We have learned that if there's a possibility, people always find a way.

Plus bitcoins do not have 6,000 years of human history, experience and literature to lean on. But that's not your or anyone else's fault.

This is true. I totally agree. That's why I hold silver. - I actually don't see much use for gold as there is nothing backing it. (Faith in anything can be fleeting - including bitcoin). Silver has industrial uses, rarity and utility to justify its price. So silver is my insurance and backup plan if all else fails. Bitcoin is my growth and optomistic investment. There is obviously room for both. I sure got tired of 'waiting in the bunker' so to speak almost 'wishing' the SHTF so I could be justified. Then realized that's no happy way to live. There has to be room for hope. This of course is measured by not overdoing it and investing an amount you'll loose sleep over.

Secondly, is there a way to counterfeit bitcoins? I confess ignorance here about how bitcoins are "mined" and authenticated / validated. But if there is any way to counterfeit them, or even trick some buyer into thinking you are transacting with 'real' bitcoins, then as bitcoins become as valuable as you believe, the pressures to counterfeit will become enormous. Thus it is always so for things of value, whether paintings, gold, or Chinese copies of DVDs.

Absolutely not. This was the MAIN reason bitcoin was invented. The inventor was shaken up by the 2008 banking crisis. He created a system that tracks every piece of bitcoin down to the one hudredth millionth of a piece and you can track every one of them back to their moment of creation. Every other processor on the network checks and validates every transaction made every ten minutes. If there is any transaction that is not tied to the previous chained block of transactions it is ignored. It is done by simple majority rules consensos, so for somebody to try to 'fool' the network, they would only be able to 'double spend' their own bitcoin twice for that 10 minute block. To do this they would have to own 51% of all the computing power of the entire network to own the consensus. That means you would have to come up with your own method of getting 400 quadrillion calculations per second, and climbing.

This is all done with unbreakable military grade encryption. Yes there are doubters of encryption abilities - but they have no idea how it works so that is like listening to a five year old explain how brain surgery works. The network has been evaluated by the best of the best experts in all aspects of computer science who've agreed it is unbreakable. As evidence - billions of attempts are made to break it every second of every day.

Is it perfect? No. The computer warehouses that are being built to win the mining rights are getting bigger and forcing the little guy out. This is consolidating bitcoin down to an uncomfortably small number in opposition to the inventor's wishes. But this is being discussed and alternatives are being worked out that would make this scenario obsolete. But good enough reason to not sink your retirement into bitcoin. It is so new that people are skittish. Every little piece of bad news scares off people and stampedes for the exits happen. Then people get over excited and the price goes up way too fast as well. It is prone to bubbles and will likely have a few more as it grows up. It's immature and probably will be for years to come - but... those possibilities up can be astonishing knowing everything I know.

It is complex and too complex for the average person to ever understand. But so is the internet. Most people don't know how HTTP works or what routers do to transfer packets of information. The internet was unusable to most people on earth in 1994 before the web browser but it didn't take long before most of the entire world used it. Investment in bitcoin companies is already outpacing investment for internet companies in 1995. By the time most poeple use bitcoin - they may not even realize it. It may be just the protocol that runs underneath all financial transactions., just as HTTP proctocol runs underneath the world wide web. But because it transfers value instead of data - and is limited in quantity - it is valuable because it has to be if it will be effective in transferring money. It's not debt based, its prepaid credit based.

Kind of like gold.

Here's a link to the original "white paper" describing the invention. I think of it as a 'Deceleration of Independence' against fiat currency. It is very well written and you can skim over the complex math section that is way over my head, but explains why it can't be counterfeit.

It discusses most things I've talked about and you asked good questions about. Satoshi Nakamoto had the same concerns. It's important to invest early before the rest of the world figures it out and the banksters take it back over That's why I'm on this board now. I'm in your camp and share your thoughts and fears. I've been visiting this site regularly years before bitcoin came along. I just happen to also be a techie and futurist.

This motivates me to read the white paper and take a serious look at bitcoins.

I most like supporting the idea of having a people's money, that is outside of the control of narcissistic, sociopathic governments.

Bitcoiners will have to be ready to fight hard. The ideas I stated above about people's money will mean that governments will surely come after bitcoins in intensity that is in direct proportion to their adoption success.

Must control the money in order to control taxes and wealth confiscation (i.e. financial repression), pay for those expensive voter bribing operations, and pay for high dollar lifestyles in Manahattan and D.C.

That would have been a day of fascination for me to get an 'inside' look at what is going on. Of course he must be reserved in public but I could just imagine behind the scenes the mixed weight of 'don't screw up' plus 'this is going to change the world' mixing.

I've done a bit of panning for gold (even in my own back yard). I'll have to try some of your ideas next spring when I dust off the old equipment for another run at my hobby.

As far as bitcoin not having any intrinsic value? I wrote a piece arguing that idea and came up with 22 reasons that bitcoin does have economic intrinsic value. This list was just off the top of my head and I can probably come up with another 22 in addition now.

Bitcoin market is small, has a global reach (it is easy for "everyone to play"), and it has very little primary utility at the moment. There is no solid bitcoin economy. As a result, it is subject to "phase transition" events, where it captures the popular interest, lots of people stampede to get in on the latest thing, and it goes parabolic, only to fade as popular interest wanes. Speculators rule the bitcoin market right now.

Just look at the price chart. That tells you all you need to know. Its a series of phase transition events, which match up perfectly with a "google trends" search on "bitcoin."

Contrast that with the USD. 300 million people use the USD every day in America. Even though everyone can play in the USD forex market, people in the US aren't going to stampede out of dollars one fine morning - they still have to pay taxes, pay off debts, pay their bills (denominated in dollars), and so on. In some sense, people are trapped in the USD by long standing custom, contracts, and use. All those written contracts where payment in USD is required - they provide a constant demand for USD.

Contrast that with bitcoin. People don't pay taxes in bitcoin, they aren't paid in bitcoin, they don't have debts denominated in bitcoin - bitcoin is a luxury plaything (at the moment) and so as a result, it will be subject to the whims of popular interest.

As a real economy develops around bitcoin, this will change. As people rely on bitcoin to execute transactions that they couldn't execute with dollars, people will be motivated to retain and use their bitcoins rather than stampeding in and out based on the current whim. I want to see debts in bitcoin, taxes paid in bitcoin, rents in bitcoin, paychecks in bitcoin, utility bills in bitcoin - then it will truly be unstoppable.

Again - the argument shouldn't be "bitcoin has no intrinsic value". The dollar doesn't have intrinsic value either, yet it sure is popular. Instead, the question should be, what can you buy with bitcoins, how necessary is bitcoin for transactions in those things, how large is the community executing those transactions, and what fraction of bitcoin owners are speculators and what fraction own bitcoin as a means of actually conducting business?

The fewer speculators and the more "business users" bitcoin has, the more stable prices will be, and the more value bitcoin will end up having.

It's not the first time we've met. It was a casual lunch with friends. He lives in our area and we have a good mutual friend (we're about the same age), so I see him periodically at social gatherings. But since it is a personal connection I'm not comfortable posting too many specifics. He's a nice guy and is working hard to expand bitcoin's reach. I don't know but I wouldn't be surprised if Chris has met him or knows him since he's in our area. Most of the talk was casual. He is optimistic of how bitcoin is currently being received, and welcomes the other ecurrencies like litecoin. That's was about it.

I posted something similar to this in the other thread Jim H mentioned but now that i've had a night to sleep on it i've clarified my wandering thoughts so perhaps you can offer some insights. My concern now is energy requirements. (As a point of reference i'm one of those pesky critical thinkers whose opinion moves with data).

Bitcoin Principles

My understanding is that the bitcoin network requires access to computing power to validate transactions and ensure people have not defrauded the system through duplication or other nefarious deeds. To do this the bitcoin network uses computers around the world to solve SHA-256 algorithms. In exchange for this computing power it rewards miners with bitcoins + some arbitrary transaction fee.

What follows is an analysis derived from this assumption - so if the assumption is wrong please correct me.

Exponential energy

In the other thread Jim H linked to i derived that in Feb 2012 the total daily hash rate was 12,000 Gigahash/s which equates to 600kJ using the most efficient miner rig on the market at that time (50J/Gigahash). With a daily bitcoin rate of 3450 Bitcoins that translates to 174Joules/s/Bitcoin. In Watts that would be 174W/Bitcoin

Fast forward to Dec 2014 and that figure jumps to 32kW/Bitcoin. (300,000,000 Gigahash/s with most efficient mining rig currently available (0.37J/Gigahash) divided by the constant Bitcoin rate of 3450 per day.)

I mean these energy requirements are exponential in growth. Plus i'm being extremely conservative with the figures. I'm assuming everyone has the most efficient rig (which they don't) and that there aren't any losses in the system - impedance losses, transformers losses, cooling requirements, etc - which of course there will be.

Assuming i use more realistic figures (say an average miner rig of 5J/Gigahash) and power losses of 20% that figure today jumps to over 500 kWatts/Bitcoin - that's some serious energy. And we're only a third of the way there - roughly 14 million bitcoins have been mined out of a potential 21 million bitcoins. So if this has been going for 5 years let's say it has another 2 and a half years before all bitcoins are mined.

So with exponential hash rate data and improved rig development for the next 2 and a half years lets do the numbers. I've gone semi-annually starting from Dec '14 at 300,000,000 Gigahash/s (exponential formula is [1 + 1/2]^2 = 2.25) gives 17,300,000,000 Gigahash/s on the final day of Bitcoin mining. Say power losses are at 20% and rig efficiency improves to give an average of 0.3J/Gigahash

Yet all these measures reward the miners with the most efficient rigs (read: the big boys). My guess is the intention is to release more money into the system either to offset operating costs or encourage investment in more efficient rigs. Yet these profits can be transferred elsewhere draining the system of impetus. Far from being de-centralised this kind of power requires major investment. Now that the major investment is in place expect the market to be corned (read: centralised). I think it was a noble ambition but they've made it (intentionally or not) so that only the big boys can access the newly released liquidity. Remind you of anything? On that basis it doesn't solve the underlying fundamental problems of fiat currency.

Thanks for sharing the tidbit gillbilly. In the interviews I've seen him conduct and the panel discussions he's been involved with give me the impression he's a cool customer and relaxed. If Satoshi trusted him to take over he must know his stuff.

I can appreciate keeping private items private so thank you and trust points earned. As Gavin is close to my age, you and I must be of a similar age as well. It strikes me that his interest is in the science and wonder of the new technology much more than any economic incentive, which is mostly true of me as well. I'm more interested in leaving a legacy to future generations that I took part in something that changed the world.

In my view, that's where the true happiness is found -knowing you did something that mattered.

I'm not going to double check your math so I will believe your numbers. But I'll explain why they (probably) won't matter.

As Bitcoin Magazine is currently changing ownership - I've got some extra time, so I decided to revisit Peak Prosperity and bring this sub-group up to speed. I've been planning my next article about this very subject So these are my thoughts before I formally publish them.

First know this. Mining is a loosing proposition right now. The mining companies cannot keep any (bitcoin) profit as the costs are so high they have to sell the bitcoin into the market immediately to pay for the costs. But if you watch closely the new 3600 new bitcoins created daily don't enter the exchanges. They are being sold to private investors hot off the presses. They could be doing this in futures contracts or other means but logically with the expense and investment the current price is not sustainable. One of the new 'schemes' is 'cloud hashing'. Here they find new investors to purchase\rent "Gighashes" of computing power that is done in their warehouse and just credited to the end user's account. But as you can see from the difficulty chart the hardware is completely obsolete in less than six months. If there is no delay between coming from the factory and plugged in mining 24x7 most of the profit comes in the first 30 days then trails off exponentially as the overall hash rate increases exponentially. If things don't work out perfectly - a delay of 30 days leaves no chance to ever return the investment.

My personal view is that it only holds together so long as new investors come in and pay for the obsolete equipment and investors. Classic ponzi. Even the Bitcoin Chief Scientist of the Bitcoin Foundation "Gavin Andresen" has raised this issue. But perhaps I'm wrong. If they have Fortune 500 companies pouring money in so they can buy the fresh coin under the radar - perhaps they are more than happy to be investors in the mining companies and are trying to force out the competition. Either way - I think it's dangerous for now. They all might be playing a big game of "chicken" to see who falls out first. The likely winners are those who get cheap energy and cheap cooling (Iceland?)

What you said about needing nuclear plants to maintain the effort hasn't been lost on the regular leaders in the space who've joke about needing more power than the entire sun not long after you're three mile island analogy based on the same kind of math you used. Something will give. (more on that later)

It can't be quantative easing. In the core of the code is the rule that lays out everything. The whitepaper explaining how bitcoin works was issued by Satoshi Nakamoto in 2008. He includes charts and explanations clearly to see how it all ties together. The set rate of issuance of bitcoin cannot be undone as it is the PRINCIPLE law of the entire system. It is not up to humans to change by design. It is the 'anti-fed' in this regard as it was designed. The idea that a computer could take over the responsibility of money creation was proposed by Milton Friedman years before bitcoin (likely influencing its own creation) He even predicted it would be available on the internet 1999 ,before he died, as seen in this video.

The rule is that a declining rate of issuance for new bitcoin is halved every four years. It started with 50 each ten minute block, it is now 25 and will lower to 12.5 in two more years - and so on. This means a gradual deflation in the currency rather than inflation which means the value of each bitcoin should raise proportionality if it is still used. Increased demand \ restricted supply...guess what happens to price?

The reward is tied to the reconciliation of the block chain which is set by the core program to happen and readjust for difficulty to always be around 10 minutes. Doing the match is the only way we know that there will eventually be only 21 million bitcoin entering into the system and we know this will happen in about the year 2140 by simply doing the math on the time of block reconciliation times the reward which is in on declining formula. The theory was that as it becomes more rare and demand increased the price will go up and the miners would find equilibrium through competition. If it is unprofitable, miners drop out and the chances for everybody else go up, and their rewards go up as bitcoin increases in value. But right now the network is far stronger than the price can support.

Is there a way to change the program? Probably not. There is an active community that maintains and updates bitcoin program as an open source project but it must meet consensus and be issued through the core development team which are all very anti-inflation \ anti central banks. But they don't control the network either.

The processors (aka miners) are the ones that agree to run the program. By majority consensus they will decide what version of the program to run. The bitcoin core programmer group have public conversations and debate what changes should be added to the code and each change is vetted and tested. You can follow this here: It is exhausting, but then you have to have the processors agree to run the new version. You must have at least 51% of them at least agree to it as the entire system is based on majority consensus.

So logically - if you own 100 bitcoin and they are worth one million dollars and somebody wants to change the program to double the amount of bitcoins awarded each 10 minute block - that would mean your 100 bitcoins would then only be worth one half million dollars...what is your incentive to run this new version of the code? What would be the incentive of 51% of the network? That's why people call it money 'of the people, by the people, and for the people. Democracy of the system wins rather than a 12 unelected officials at a private bank.

So what will end the unsustainable network power requirements? One likely thing is the manner in which the network is protected. The current system based on SHA-256 is using a method called "proof of work". This is what makes it computationally hard to crack the network but there are alternatives. Proof of stake is one of them being experimented with in alternative currencies.But there are others. Something like this would probably be phased in with plenty of advance notice so the current miners could prepare. Six months would likely be enough time as their current equipment would likely be obsolete by that point anyway. This will also likely redistribute the concentration of power more evenly again. That's a big reason you don't see the bitcoin developers worried about the concentration of mining today.

Having these backup methods are also a big reason why it would be fruitless for a hostile country \ bad actor to try to take over the bitcoin network. The code could be adjusted to swap the current method for a new method rendering an attack futile and the billions of dollars invested in equipment needed to commandeer the network would be embarrassingly wasted.

So when you think we've met our technological limits, remember that we were supposed to run out of TCPIP addresses 15 years ago, and then technology allowed ways to get around it. People said that you could never do voice over IP for a phone system on the internet...and then we invented away to do that. Then they said you could never have enough bandwidth to do video over the internet - and it didn't take very long for us to solve that. I've been hearing that we've reached the end of "Moore's law" every five years for the last 20 years and my old Pentium chip of 1995 was the fastest we would ever see. The technology always finds a way.

It is most excellent having your commentary here for the moment.. I am learning much!

Two comments on the above;

So logically - if you own 100 bitcoin and they are worth one million dollars and somebody wants to change the program to double the amount of bitcoins awarded each 10 minute block - that would mean your 100 bitcoins would then only be worth one half million dollars.

While I agree that Bitcoin owners are not incented to cast their vote toward making future Bitcoins come more easily... I would just suggest that, even if this were to happen, the math would not work out as you say. Today, 13.6 M of the 21M total to-be-mined Bitcoins already exist. So, we have to think through scenarios like above in a kind of stock-to-flow mindset. Like Gold today, the majority of Bitcoins that will ever exist already exist and are owned by somebody (OK, some have been lost forever.. but you get my point). So if you double the rate of emission of new Bitcoins... it's not going to have too much of an effect on the price .. there is already a huge stock. Doubling the flow is not going to drive the price down by half. If you could somehow double the total number of Bitcoins.. well then.. I would agree. But double the award rate for miners? Almost no effect at all on price.

I don't have time to look at the math (Luke's) on power either.. just a few editorial comments; Big Computer data centers already suck up something like 3% of the world's electrical power.. this is the price we pay for Corporate accounting software, one-click ordering from Amazon.. all the things we take for granted. You may think it a deal with the devil... but it's a deal all but the Luddite's and Amish have bought in to.. that we want the benefits of all this software running on all these computers. Bitcoin is just another app.. another manifestation of this trend.

I will also say that computers will continue to get more powerful, but will do so using less electricity. Your power scaling is simply linear and does not take this future improvement in efficiency into account. Since I just had a meeting today, in my capacity as a semiconductor engineer, with the Silicon supplier that is in the lead for providing substrates for the FD-SOI CMOS generation, I will quote you some of the expected benefits;

Leti has demonstrated that switching from bulk 28nm to 20nm FDSOI technology can improve circuit speed by 35% or lower the dissipated power by more than 50% at a given speed, which are among the best gains reported on planar technologies, and highlight the benefits of this FDSOI technology. Since this technology does not require any significant process and design breakthroughs, it can thus be considered as an efficient booster of the planar bulk.

The article is old, but the benefits are real and we will have working devices by mid-2015. Moore's law and all that.

One other thing that Luke said in his modeling... this is all wrong;

Assuming i use more realistic figures (say an average miner rig of 5J/Gigahash) and power losses of 20% that figure today jumps to over 500 kWatts/Bitcoin - that's some serious energy. And we're only a third of the way there - roughly 14 million bitcoins have been mined out of a potential 21 million bitcoins. So if this has been going for 5 years let's say it has another 2 and a half years before all bitcoins are mined.

The rate of difficulty in mining Bitcoins is going to keep increasing.. hence just because it took 5 years to mine the first 14M of 21M... then next 6M won't be mined in 2 or so years... not even close. This math is just plain wrong. See MRees mention of the year 2140? Now this is kinda silly on some levels because I would expect we have working quantum computers by then, which trash the crypto... but.. the point is that the difficulty goes exponential and the rate of new coins slows down similarly. It's not going to take 2 years.. it's going to take 100 years.

The concern becomes not where are we going to get the power to mine.. but where are we going to get the miners to maintain the network in an era of diminishing returns.. just like MRees points out. I think nature will find a way. Putting my monetary philosophers hat on.. I think that folks will get so disgusted with bankers and their infinitely printable, debt-based money over the next few years that the problem will simply resolve itself through deflation.. the demand side of the supply vs. demand balance will spike, and single Bitcoins will fly past $1000 for the second time.. this time not looking back.

Trading bitcoin entirely based on its use as a currency missing much of the point. Its use as a payment technology is much more important right now. It's a fairly cruddy currency right now because of lack of stability.

Being able to be a vehicle to transfer national currencies across boarders is a very big deal. The length of time renders volatility moot. Take out Western Union and handle business remittances in minutes verses days for international payments will be huge. Banks adopting it for money transfer will mean big time changes to large financial systems converting from Swift and ACH wire transfers that days rather than minutes.

The other big push in the tech world is called "the internet of things" where machine to machine internet communication will happen in within devices. Say for example cars that talk to each other and warn of traffic jams ahead. Or for WiFi radios to coordinate. They are now finding was to include bitcoin fund transfer to pay 'rent' for access and transfer value for services automatically. Say you want to provide ISP relay service using your cell phone automatically. Your phone can turn on the access for others that don't want to use their minutes and one can make money on their phone for allowing the service. This could be at a metered rate of a few pennies per meg or whatever. How about your car 'talking' to the gas pump and transferring value for the charge. Or arranging for Electro power fill up on new grids. Or power generation by somebody with more solar panels than he needs selling extra to his neighbors based on their consumption measured and paid automatically.

M to M will be big and not possible with dollars.

Or this for example that I just read about yesterday.

https://medium.com/backchannel/bitcoin-for-rockstars-ca8366802f9

Using the technolgy to find out who owns what rights to songs? Where music rights can be sold by the artist or procedes split between shared owner's rights. When a song is played, now many people\companies\supporting memeber get their cut? These things can be programtically spread to the correct owners automatically.

New technologies are taking off in the crypto 2.0 realm. Counterpartycoin, Ethereum, Maidsafe just being three examples that will take this to the next level with voting methods, and autonomous digital corporations that exist in the cloud between all borders that act as a business that conducts contracts and acts as an entirely new programming operating system for the use of automating contracts. These new technologies are already changing how we think of new business models and consideration of entirely new industries that will be made obsolete. It will make the web disruption look like a slight breeze in comparison. An entirely independent stock market will be developed by counterpartycoin that will replace stock exchanges as we know it to automated contract base and ownership of each right can be directly verified on the blockchain vs many calls to many lawyer and stock brokers who have lost track of true ownership as these rights also get split, sold, and collateralised so complexly that multiple companies think they are the ones who own a stock or property and we saw trat play out in the housing crisis. A single source of truth remove all of that. These are just a couple of ways to use bitcoin that can replace current money\currency.

It's a brave new world where bitcoin was just the begining. I've invested money in all of these next generation efforts as well. We are probably years out but not decades. There will be lots up ups and down in price as it matures.

Assuming i use more realistic figures (say an average miner rig of 5J/Gigahash) and power losses of 20% that figure today jumps to over 500 kWatts/Bitcoin - that's some serious energy. And we're only a third of the way there - roughly 14 million bitcoins have been mined out of a potential 21 million bitcoins. So if this has been going for 5 years let's say it has another 2 and a half years before all bitcoins are mined.

The rate of difficulty in mining Bitcoins is going to keep increasing.. hence just because it took 5 years to mine the first 14M of 21M... then next 6M won't be mined in 2 or so years... not even close. This math is just plain wrong.

Jesus, Jim, take a breather and read what i actually write. If the rate of mining slows so that only 2M Bitcoins are mined instead of the 6M i mentioned over the same period of time then that actually strengthens my argument. Less Bitcoins mined per unit energy going forward is my argument. And no, my maths is not wrong. Unless you live in a world where a lower denominator produces a lower value. But i don't live there. What's it like?

mrees999 wrote:

My personal view is that it only holds together so long as new investors come in and pay for the obsolete equipment and investors. Classic ponzi. Even the Bitcoin Chief Scientist of the Bitcoin Foundation "Gavin Andresen" has raised this issue.

Agreed. This is where i stand at the minute.

mrees999 wrote:

What you said about needing nuclear plants to maintain the effort hasn't been lost on the regular leaders in the space who've joke about needing more power than the entire sun not long after you're three mile island analogy based on the same kind of math you used. Something will give. (more on that later)

and

mrees999 wrote:

So what will end the unsustainable network power requirements? One likely thing is the manner in which the network is protected. The current system based on SHA-256 is using a method called "proof of work". This is what makes it computationally hard to crack the network but there are alternatives.

This was a point i wanted to make as well. Can the encryption handle a reduction in energy as the network expands? Alternatives will definitely be needed in my opinion so i guess we'll watch this space. Innovation will be essential but I still think the energy requirements will be a killer though. Energy being essential to all economies and not just bitcoin

My stance is that i'd rather see the energy spent on building automated farming units but that's because it's becoming a hobby of mine. I'm going to check out some of the other technologies you mentioned, such as Counterpartycoin, and see if they tickle my fancy. My contempt for central-bankers could rival Andrew Jackson's :)

Thanks for spending the time to share those insights.
All the best,
Luke

Some people are talking about buying bitcoin now as a modern day "land grab" for property that will be coveted in the future as the de-facto single source of truth. And the first system in the world that allows anybody in the world to use it without needing to trust anybody else's word that vow to hold our gold, or dollars, or silver or anything else that would require trust.

Dear Marc,

a historical example:

During the first third of the 17th century tulip bulbs became a kind of alternative money in the Netherlands. They had the great advantage of being fraud resistant. In contrast to silver coins they could not be counterfeited. They had to be grown. The supply was constrained by nature. Their growth rate was limited and could not be manipulated. Tulip bulbs could not be confused with bulbs of other flowers and were easily portable. Nevertheless their use ended in a speculative bubble from 1635 to winter 1637 and in a crash in February 1637.

mrees999 wrote:

Havning a block chain that leads them to all people involved like breadcrumbs will be a hudge adanvce of dollars which are usually untraceable. And bitcoin is impossible to counterfeit.

That may very well be so but as long I don’t understand the technical process of generating and transacting bitcoins I can be fooled and deceived even if / when real bitcoins themselves cannot be counterfeited. I lack the knowledge and skills to figure out by myself whether something offered to me under the name of “bitcoin” is a real bitcoin or not. I have to rely on others being able to assess the technology behind it.

So my voluntary acceptance of bitcoins completely depends on my confidence and trust in bitcoins as it holds for any other currency. No currency in the world can be separated from and fulfill its functions without the social dimension of confidence, trust and faith.

Money has an irreducibly social dimension. No single thing, no chemical substance or whatever is money by itself. It only becomes money when it is treated AS money. The decisive term here is “as” expressing a relational property.

Let us imagine a Robinson Crusoe living in total isolation. There would be no money in his world because there is no need to fulfill the functions of money.

The same holds for the property of “having value”: No single thing, no chemical substance or whatever has value by itself. It only gets a value AS something and FOR someone:

Cellulose has a nutritional value AS food FOR termites but not FOR human beings and not for most mammals because they cannot digest it.

mrees999 wrote:

It's important to invest early before the rest of the world figures it out and the banksters take it back over

On peakprosperity one can often read that governments a round the world deceive people and confiscate their wealth. But isn't the bitcoin speculation motivated by the same wish to get super rich without effort, without working for it?

Don’t bitcoin speculators / investors think that they merit a putative windfall gain because they are a kind of a new smart elite being ahead of the uninformed crowd?

This is all done with unbreakable military grade encryption. Yes there are doubters of encryption abilities - but they have no idea how it works so that is like listening to a five year old explain how brain surgery works. The network has been evaluated by the best of the best experts in all aspects of computer science who've agreed it is unbreakable. As evidence - billions of attempts are made to break it every second of every day.

“What Nigerian scams are to your grandfather, Bitcoin exchanges are to the 20-30 semi-tech-savvy libertarian demographic.

Even if the Bitcoin protocol were perfect, and it isn't, our computing infrastructure is not up to the task of handling high-value transactions. The exchanges are built on the latest hyped technologies that have incredibly poor guarantees, and routinely run into technical problems. They require full trust for their operation and are open to attacks from insiders and out. In a world where secret agents are hopping across machines and networks, keeping coins safe in a computer is a losing battle. Even if you keep everything in cold storage, laptops and phones can be infected with malware that steals coins when they come out of cold storage. -”

I Tried Hacking Bitcoin And I Failed

Mt Gox - is short for "Magic the Gathering Online Exchange". It was a website built to trade collectable playing cards. They switched to bitcoin when it was selling for less than $1.00. The CEO was a project manager who also knew how to write scripts in some very non-sophisticated method. He had no security and had no security audits. He had no accounting audits. he was the ENTIRE IT team, security team, accounting team. He reported to nobody and was in a non-regulated business in Japan where governments had not even heard of bitcoin let alone knew the first step in regulating it. This place was Chucky Cheese suddenly thrown into the world of "Goldman Sachs"

Not surprisingly - he was hacked. Then his company tried to hide it and 'catch up' and in effect became a ponzi scheme. The CEO was sort of a Bernie Madoff needing to get new customer funds to keep the ball rolling. He was a criminal (I think). His software methods of verifying bitcoin transactions took shortcuts that didn't verify the transaction happened on the central ledger - defeating the entire purpose it was built.

There were a couple of other smaller exchanges that were mom\pop that also used this shortcut sloppy code that wouldn't be allowed to be in production in even the smallest regulated family bank. But because bitcoin isn't very well understood - a lot of people mistakenly thought bitcoin itself had been hacked. That is like saying the entire world of email had been hacked and was no good, just because a hotmail server got hacked.

Bitcoin is much more than money \ payments - and especially one exchange. I feel really bad for the people who lost money there. There was no way I was going to keep a dime in that place as it was rumored to be hacked for months before it imploded. A lot of people inside the bitcoin community had a bad feeling about that place.

But that's how this currency and technology had to start. It wasn't invented and created by the big banks \ governments - it was too different and who would have signed off on that project??? It had to be created from the outside.

Then who would get something like bitcoin from the handful of techies that knew about it and mined it for the first 18 months when it had no value? Somebody had to arrange to get it out of the hands of a few hundred into the world so it could be useful. Who would do that? JP Morgan? No established companies were going to do that - in fact I don't think any big financial institution in the world still has used\ traded it yet. So somebody had to? Who would do that? It had to be these little mom\pop exchanges that didn't have much to loose and were open to try new things. That's how RADIO on TV and even the internet itself started out. Big established companies HATED the new technology.

If it is going to be a PARADIGM changer - its not going to come from the establishment - right? I could give you a lesson in world history to support that claim, but you likely already have the wisdom to know that already.

If you think about it - if you were going to start a new digital currency that was stateless and couldn't be hyper inflated, you would have to find a way to keep it from being killed by those people\government that would want to kill the baby while in its cradle. Somehow it must get to the common people and let the word spread, so there's no way the established players would go along with that. Why would they want to threaten their own milking cow? You would hope that by the time it found its way onto the RADAR of various governments - it would have grown too big to kill it. I can't think of another scenario where this would work without these little mom\pop exchanges that would spread it out. These little clumsy exchanges that kept being hacked or going out of business were just enough to get the "Seeds" of a new currency spreading by those who wanted a new digital versionn of gold that was out of the hands of government manipulation.

That being said, it is still extremely small. Things might go south I suppose. It's not perfect. But it is the new invention that I would argue could be bigger than the internet. But why take my word for it? I'm nobody important. I just an 'evangelize' of the technology. I think it's really cool and will change the world. If I'm able to get it up on your radar, my job is done because the technology will speak for itself. I don't blame anybody for being skeptical. I was. You started out just like we all did, find out all the negative side first, keeps you honest. But remember that 99% of what you read is from people that don't understand it. It doesn't stop their mouth from moving.

When somebody says the 'magic' word about something, that is usually the point where my brain "short circuits" the idea about whatever the scheme was - and I don't pay attention after that. Scams come and go. (Nigerian Prince?). But bitcoin was a techy thing and it wouldn't go away after it was declared dead at least three different times before I took a 'deep dive'. Then one night when I couldn't sleep I clicked on some of the links so I could learn more - and fell in the rabbit hole. But I understand why you would still be skeptical as you don't know me. So I've put in a few of the most respected names with links to their views on bitcoin once they did the research to know what they were talking about. You did the right thing by finding all the skeptics so you have a balanced view. Now - let's see if I can provide balance:

I could give you a thousand more equally impressive views. But fill in the blanks between the lines. Bitcoin total market cap is about 3% of APPLE Computers current cash on hand... Why all the fuss about something so small it's not even a drop in the bucket of one company?

Hi Aurthur, sorry I didn't see this reply earlier. Thanks for your continued interest in learning more about this new technology. I'll see if I can give you good answers to your questions.

It's funny, I hadn't heard anybody still call it a tulip bulb or benie baby in over a year - that brings back memories :) The year 2014 was a year of "Big Bang" in bitcoin with an explosion of the ways to use bitcoin that have nothing to do with its use as a currency. It has WAY more intrinsic value than that.

Ways that bitcoin is not a tulip bulb:

1. It reduces counter-party risk as the value is held in escrow in the contract stored inside the bitcoin itself. Can be used in 'forward contracts' for its own for example. (Disruption of escrow companies)

2. Contracts - is the new business model that 'bitcoin 2.0' technology will revolutionize. Businesses that are being created that will use them could be discovered as the next 'Google, Facebook, or eBay'. This is the new technology that they are being created to use. Bitcoin is the nursery and the invention of the 'blockchain' is the engine. (Disruption of legal \ court systems)

3. Crowd Funding. Funding can happen all over the world, not just US. Venture Capital itself is being revolutionized. Micro-venture capital - crowd sourced (think Kickstarter.com on steroids).

7. Credit Reporting \ Reputation Systems can be automated by computer code referencing the block chain for history. (Disruption of credit borough industry)

8. Automated market reporting and analysts. Public company records can be tracked and recorded in the block chain. Eventually Reducing need to record and track thousands of different company ledgers of aggregate analysts. (disruption of financial services)

9. Smart accounting (Triple book accounting?) Automated transaction recording in a public ledger. (Disruption of auditing and accounting - including government regulators).

11. New central record for bittorrent technology. File sharing \ movie\tv and other media files will be impossible to shut down or fake. (Continued disruption of movie\tv licensing business models - perhaps a few pennies per view so content creators can compete fairly and remove unneeded border restrictions)

13. Revolutionize music and and media industry payments and rights. Using the block chain to find and pay artists for their work in collaborating and being credited for royalties. (Disruption of legal \ copywriting \ attribution and royalty markets).

14. Decentralized Domain Naming Systems. - The global 'lookup' table that establishes the system of root level domain names (the ones that put the dot com in the website you visit) - can be removed and automated by computer code keeping record in the block chain for world-wide lookup. (Disruption of the internet)

15. Provides method of using 'smart property'. Can be used to establish ownership of real-world devices such as a car with digital locks. The private key held in bitcoin wallets can be used to unlock digital locking devices - including the ability to start a car. (Disruption of auto \ auto insurance \ property courts)

16. Connecting the Internet of Things (Commonly called IoT by big business these days). The IoT technlogy rolling out in 2015 and beyond will allow tiny computers to be put on ...well... everything that will continuously communicate with each other in swarms. Projected 20 billion devices within a decade. For devices to coordinate incentive to work with each other and cooperate - bitcoin and blockchain technology is being worked into the technology by IBM and others (Disruption of electrical grids\ utility \ fuel \ wi-fi, internet, and well...everything)

A really good video was just put out on youtube about some of these use cases today - you can see part one here:

Now...about your tulips they could...grow \ look pretty. What else?

The block chain technology. It doesn't take much to understand it. Just like when you wrote and received your first email - it probably seemed strange at first but you likely got the hang of it pretty quickly. If you go to blockchainl.info you can see all the transactions that are running on the network in real time. You can create a wallet and get a few bucks in bitcoin to transfer back and forth to see it show up on the public record there. Sending and receiving bitcoin isn't much different than sending and receiving an email - except everybody can watch it happen in real time. Many programs are being written by many new companies to do some very cool things with that record. - As you see from the 16 reasons above.

You can't counterfeit coins because they are created using encryption. Here's a simple five minute video on how that works using examples in mixing paint. It makes it easier to understand how and why it is impossible to break. These are the videos that congressmen are now watching as they learn how and why to regulate bitcoin. Even old Congressmen can learn a new trick or two.

Believe me very few 'elite' understand anything about bitcoin yet. You would think than when the smartest people in the world all get excited about a new technology they would be all over it, but these were they guys calling it a Tulip Bulb just a year ago. It will take these guys a little longer to swallow their pride and admit they goofed. There is still time. How long will it take them to swallow that humble pie? It probably won't be long now that Microsoft announced they are now accepting and using bitcoin. Add that to Dell, and many of the fortune 500 companies and people are starting to take it seriously. But I just read that Google Searches went up 300% this last week. David Fairfax on this board will tell you what that means...

And finally - I always try to be truthful. I'm not selling anything. I might start a youtube channel to give truthful answers and post videos for people like yourself that have heard the 'scam' talk and are rightfully anxious about the technology. I'm not afraid to call 'scam' to those I think are scamming. Bitcoin world isn't immune to those snake oil salesmen either. I'm thinking about doing my own youtube channel to give 'strait talk' and help newbies avoid the sharks. It's still confusing for people and I really don't see anybody else providing that service on Youtube. Nobody is advising people on where to tread lightly or avoid.

I cam across the above article yesterday, 1/19/16. Looks like a major player in bitcoin is loosing faith due to the fact that the transactions are taking longer and longer. Can it be that a simple money velocity problem can be bitcoins downfall? From what I gather each time a bitcoin, or faction of a bitcoin changes hands another 'ID' gets added to the blockchain and sooner or later each bitcoin will reach its 1MB size limit. Would like to hear someone who is more familial with bitcoin than I am comment.. Thanks.

No bitcoin is not failing. In fact is has been pronounced dead about 93 times (and counting) already but is actually stronger now than ever. I explain why below.

Mike Hearn wrote an article about why he was leaving bitcoin. He was influential in the early days of bitcoin and very opinionated but was not particularly well like by many in the bitcoin community. His contribution to the actual bitcoin code was around 140 lines out of millions of lines. He went to work for R3 banking consortium, which is now the ‘competition’ to bitcoin as the consortium of banks are working to create their own private alternative to bitcoin and its in their best interest to slow down bitcoin’s lead to allow them to catch up. Therefore, we have to keep that in mind when we see Hearn is no longer ‘neutral’ in the game. It’s now in his financial interest for bitcoin to slow down or create FUD.

Hearn made a recommendation to change bitcoin into what he called ‘bitcoinxt’ but the industry didn’t go for it. The protocol evolves in open standards and is voted on in democratic function by the processors choosing what version of the software they run; thereby ‘voting’ on the best most stable system, which they believe, is in the best interest of the system. This is by design so no bad actors or governments can take it over. TRUST is the main component and commodity that you pay for with bitcoin. People have trust that the most powerful computer ever conceived is keeping every transaction and record of ownership from being tampered (for better or for worse).

There are other proposals for handling the bottleneck problems he mentioned from competing programmers that the majority felt was more stable and tested. Hearn wasn’t involved with those other methods so his opinion is biased. He failed to show up to the industry conference where “Segregated Witness” was proposed and gained the support from most of the community right away and addresses the bottleneck issue as well as bring a host of other improvements that go far beyond what Hearn had developed. The publications that reported on Hearn’s opinion were not technical savvy and did a poor job of balancing his opinion with competing visions that hold more weight in the community. The fact is bitcoin already has by far the most support behind it from a host of companies that are building new business models on bitcoin’s blockchain and a host of the new use-cases have nothing to do with bitcoin the currency – but use the ‘other side of the coin’ which is the engine running bitcoin called the blockchain.

There is a lot of miss-talk and misunderstanding about the ‘blockchain’ where a lot of bankers and reporters refer to it as something different than bitcoin but it’s two sides of the same coin. The public blockchain only works because the transaction processors (miners) are paid in bitcoin to keep the network going. In short, without bitcoin there is no blockchain and most of the new blockchain bandwagon bankers don’t yet realize that. Here is just a sample of companies building new business models on the bitcoin blockchain – and even creating ‘side-chains’ that peg to the bitcoin blockchain to bootstrap onto the security of bitcoin’s protection. You can do web searchs on all of these companies to learn more.

• Blockstream – liquid process for clearing house transactions between financial companies for settlement. This was Hearn's basic complaint but it's being handled in a high-spead pegged side-chain.

• Factom – Oracle of truth for all records including property deeds and ownership records

• Ethereum – uses its own blockchain (and has its own blockchain currency “ether” you can buy). It is intended to run pegged to bitcoin but can handle programmable smart contracts. It is now supported by Microsoft using their Azure cloud service and the programmable API code pieces are being constructed.

• Provenance – Complete supply chain tracking mechanism.

• Onename – Identity management

• Shocard – Consumer protection and privacy \ Security

• Tierion – Internet of things, machine to machine identity.

In short, things are just beginning as these companies are just now starting to get products to market. Far from being dead – bitcoin is just now scratching the surface for what is ahead - this list just scratches the surface of hundreds of new companies as an entire new ecosystem is evolving much like it did around the internet.